New Brighton resident Dorothy Thompson was shocked to learn she was charged $33 by her bank for a $4 Starbucks coffee when she used a debit card to buy the Java on an overdrawn account.

That's because instead of declining the coffee purchase, her bank recently approved the charge and others, funded the transactions and then hit Ms. Thompson with overdraft fees for each purchase -- $165 in total -- before she even realized the account was overdrawn.

That's when she learned her new account had what's often known in the industry as an automatic "courtesy overdraft or bounce policy" for electronic transfers. That means the bank will pay for debit charges or approve an ATM withdrawal even on an overdrawn checking account, and then implement the fees.

And those overdraft fees and other bank charges, already on the rise, are only expected to go higher as banks try to offset losses in other areas. Bankrate.com recently reported that banking fees, balance requirements for checking accounts and ATM costs are rising while interest earnings on checking accounts are not.

Ms. Thomspon said she fought hard with Sovereign Bank to remove the "courtesy overdraft" feature from her account. After threatening to close two other accounts at the bank, management agreed to remove the feature.

"As far as I'm concerned it's extortion," she said of the policy during a recent interview.

Meanwhile, Sovereign Bank's overdraft fee increased last week to $35, an amount the bank said is line with its peer banks in New York.

"The best way for any customer to avoid overdraft fees is to have sufficient funds in the customer's account to cover all transactions the customer makes. In addition to keeping an updated register, which is the best way of keeping track of what funds a customer has in her account, Sovereign provides many options for a customer to monitor transaction activity as well s the current balance in the customers' account," Edward Shultz, a spokesman for the bank, said in an e-mail.

Shultz said the overdraft convenience feature on checking accounts and electronic purchases has been in effect since 2002. He said it's a way to spare customers the embarrassment of being rejected for a purchase or allow them to obtain cash when they have an urgent need for it but are overdrawn on an account.

He said the majority of people who don't use the service typically sign up for an overdraft protection service or maintain sufficient funds in their account.

MANY COMPLAINTS

But enough people have complained about banks' overdraft convenience features on ATM withdrawals and debit purchases that the Federal Reserve Board is now proposing changing the system.

The board has drafted a new rule that could be approved by the end of the year and would give customers a chance to either opt in or out of the automatic overdraft protection on electronic funds like ATM withdrawals and single debit purchases.

Overdraft policies for checks and recurring debits, or the kind of big bills that are automatically deducted from checking accounts each month, would not be subject to the change.

"In most cases, consumers are automatically enrolled in overdraft services," said a spokeswoman for the Federal Reserve Board. "These proposals give greater control over payment of overdraft fees."

But the best way for people to combat ever increasing bank fees is simply by focusing on ways to avoid those charges.

Greg McBride, a senior financial analyst with Bankrate.com, a personal finance web site, said consumers should try as much as possible to use their own bank's ATM. That's because ATM charges for noncustomers have more than doubled over the last 10 years.

He also advises people to sign up for on-line alerts from their bank when their account gets low. And he said customers can request that their savings accounts be linked to their checking account as a way to provide overdraft protection if the latter is overdrawn. It's a low cost protection banks don't always advertise, he said.

"As consumers we really have to be on our toes because banks have placed increased emphasis on fee income that will continue to go into overdrive given the broader financial climate," he said.

"Most of these things are avoidable if you pay attention or modify certain behaviors," he added.